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With no notice, long-term-care costs rise for federal, military retirees

WASHINGTON — Premiums in the long-term-care insurance program for federal and military personnel, retirees and certain family members have increased, with no prior notice, for those newly buying coverage.

The Office of Personnel Management has said that rates rose as of Aug. 1 for new enrollees in the Federal Long Term Care Insurance Program, which offers in-home and nursing-home care benefits for those with certain physical or mental incapaciites.

Participation in the FLTCIP is voluntary, and its costs are borne by enrollees. The insurance is offered through an OPM contract with John Hancock Life & Health Insurance.

In a notice to agency benefit officers Monday, the OPM said that it and John Hancock "have determined that premium rates for new applicants under the Federal Long Term Care Insurance Program should change to ensure they are adequate to cover projected benefits for new enrollees. The new premium rates are effective August 1, 2015, for applicants who apply for FLTCIP coverage on or after that date."

The new premium rates do not apply to those enrolled before that date but do apply to those who had rates quoted to them before then but who had not formally enrolled, the OPM added.

FLTCIP enrollees may choose among different maximum daily payment amounts for care, length of coverage and inflation protection, all of which affect the premiums — as does an individual's age at enrollment.

The announcement did not specify by how much rates have increased, but in response to an inquiry, the OPM said the increases apply to all options but vary according to a purchaser's age and choices.

It gave as an example an employee buying three years of coverage with a $150 maximum daily benefit and 4 percent annual inflation protection. At age 40, that package of options now costs $42.68 biweekly, $15.45 more than if bought before Aug. 1. At age 50, it's $50.29 biweekly, up $8.08, and at age 60, it's $75.62, up $6.87.

The John Hancock company did not respond to a request for further information.

Imposing an immediate premium increase — effectively, a retroactive one since the change took effect Saturday but was not announced until Monday — is highly unusual if not unprecedented in insurance programs for federal employees.

Premium rates in the health insurance and vision-dental insurance programs typically are announced each September in advance of an open enrollment season that starts in November, with new rates taking effect in January. The life insurance program rarely changes its rates, but when it does, it similarly holds open seasons for coverage at a future date.

The last premium increases in FLTCIP occurred in late 2009 but was announced months earlier, after the OPM and John Hancock reached a new contract agreement. In that case, certain benefit offerings changed, affecting rates of those newly purchasing policies starting in October 2009.

In addition, rates were increased effective in March 2010 for some existing policyholders, who were given a chance to restructure their policies to keep premiums roughly the same if they wished.

In an emailed comment, the OPM said it "did not announce the rate change in order to limit the confusion for current FLTCIP enrollees. Federal family members were and are able to apply for FLTCIP coverage at any time. This is consistent with long term care insurance industry practice; the new rates are communicated as soon as they become effective. This avoids the potential for individuals to make a rush decision to purchase without full consideration of their needs and the product options."